CALIFORNIA
The former chief operating officer and chief credit officer of the United Commercial Bank was sentenced Tuesday to more than eight years for securities fraud that caused the failure of the ninth largest bank in the nation, according to officials.
The estimated losses of this bank failure was more than $677 million, according to officials.
Ebrahim Shabudin, 66, of Moraga, California, also was convicted of other corporate fraud involving United Commercial Bank or UCB, officials said.
U.S. District Judge Jeffrey S. White also ordered restitution in the amount of $348,000. The judge also allowed Shabudin to begin his sentence.
The sentencing brings to a close one of the most significant prosecutions to arise out of the 2008 financial crisis, authorities said.
“As the Chief Operating Officer and Chief Credit Officer of United Commercial Bank, Ebrahim Shabudin presided over one of the largest securities fraud schemes in the history of this district,” said U.S. Attorney Melina Haag. “His prison term should serve as a warning to persons who believe that complex commercial crime will not be detected and prosecuted. I am proud of all the hard work of the attorneys and staff of this office and of our federal partners that resulted in this successful prosecution.”
Shabudin was the Chief Operating Officer and Chief Credit Officer at UCB in 2008 and 2009.
Shabudin was the second most senior officer in executive management at UCB after former Chief Executive Officer Thomas Shiu-Kit “Tommy” Wu.
On Nov. 6, 2009, UCB was taken over by the FDIC.
With over $10.9 billion in assets, UCB’s failure was the ninth largest failure since 2007 of a bank insured by the FDIC’s Deposit Insurance Fund, according to the FDIC.
In 2013, FDIC estimated that total losses for UCB would exceed $1.1 billion.
Through 2014, however, with the recovery of the United States economy, FDIC now estimates the loss to the Deposit Insurance Fund to be approximately $677 million.
On Nov. 14, 2008, the Troubled Asset Relief Program or TARP provided approximately $298 million in federal funds to UCB during the financial crisis.
Shabudin was charged with conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and falsely inflate the bank’s financial statements.
Among the records Shabudin was charged with falsifying were those filed with the United States Securities and Exchange Commission and FDIC related to the third and fourth quarters of 2008 describing UCB’s so-called Allowance for Loan Losses, according to authorities.
Also falsified were documents relating to UCB’s quarterly and year-end earnings per share as announced by the bank to the investing public, officials said.
On March 25, 2015, following a six-week trial, a jury found Shabudin guilty of seven crimes related to the scheme:
- Count One:Conspiracy to Commit Securities Fraud, with a maximum penalty of 25 years of imprisonment, a $250,000 fine, a five year term of supervised release and a $100 special assessment.
- Count Two:Securities Fraud, with a maximum penalty of 25 years of imprisonment, a $250,000 fine, a five year term of supervised release and a $100 special assessment.
- Count Three:Falsifying Corporate Books and Records, with a maximum penalty of 20 years of imprisonment, a $5,000,000 fine, a three year term of supervised release and a $100 special assessment.
- Count Four:False Statements to Accountants, with a maximum penalty of 20 years of imprisonment, a $5,000,000 fine, a three year term of supervised release and a $100 special assessment.
- Count Five:Circumventing Internal Accounting Controls, with a maximum penalty of 20 years or imprisonment, a $5,000,000 fine, a three year term of supervised release and a $100 special assessment.
- Count Six:Conspiracy to Commit False Bank Entries, Reports, and Transactions, with a maximum penalty of five years of imprisonment, a $250,000 fine, a three year term of supervised release and a $100 special assessment.
- Court Seven:False Bank Entries, Reports, and Transactions, with a maximum penalty of 30 years of imprisonment, a $1,000,000 fine, a five year term of supervised release and a $100 special assessment.
On Dec. 9, 2014, Chief Financial Officer Craig S. On for UCB plead guilty to one count of Conspiracy to Make a Materially False and Misleading Statement to an Accountant.
On Oct. 7, 2014, the bank’s Senior Vice President, Thomas Yu, plead guilty to charges of conspiracy to commit false bank entries, reports and transactions related to his preparation of false and misleading reports.
Both On and Yu await sentencing.